Demand drivers for genetic improvement
Drivers
INCREASING DEMAND FOR ANIMAL PROTEIN
The global population is expanding and urbanising, and seeking a more varied and nutritious diet. This is driving increases in consumption of pork, milk and beef, which are forecast to grow by 1–2% p.a. in the next decade.
NEED TO PRODUCE FOOD MORE SUSTAINABLY
Competition for resources, such as land and water, and the need to reduce greenhouse gas emissions to tackle climate change, puts pressure on farmers to become more efficient through the use of technology and genetically superior animals, which are demonstrated to be more sustainable.
CONSUMERS ARE DEMANDING BETTER PRODUCTS
Consumers are increasingly demanding healthier and more sustainable products, which are produced with a focus on animal welfare, traceability and reduced drug use. This increases farmers’ demand for genetically superior breeding animals, which are naturally more resilient and sustainable.
FARM CONSOLIDATION AND TECHNOLOGY ADOPTION
Progressive farmers, who are more open to new technologies and measure performance in more detail, are consolidating the sector. They understand the economic and sustainability benefits of genetically superior animals and optimised breeding strategies, such as combining the use of sexed dairy and beef semen on dairy herds to maximise profit.
Trends in our market
PORK
Production
Pork tends to be produced in pyramids, as shown in the diagram below.
Genetic improvement is driven at the top of the pyramid. PIC has three highly bio-secure elite farms in North America where we conduct genomic selection on our proprietary herds of pure line pigs. The best animals are retained in our elite farms whilst other top-performers are cascaded down the pyramid.
High-performing males are sent from the elite farms to boar studs. Here, semen is collected and used throughout the rest of the pyramid to artificially inseminate females.
High-performing females are sent from our elite farms to nucleus farms. Here, their numbers are expanded so that we have a sufficient number of pure line animals to supply our multiplication partners.
Pure line females from nucleus farms are sent to multiplication farms where they are cross-bred with semen from males of a different line.
Cross-bred female offspring from the multiplication farms are then sent to commercial farms where they are inseminated with terminal boar semen to produce offspring that are sent to slaughter.
PIC only owns proprietary assets at the top of the pyramid. This delivers high return on invested capital (ROIC) and reduces our exposure to the financial risks of pork production, such as feed costs, disease and pork price volatility. Our proprietary footprint, coupled with long-standing nucleus and multiplication relationships, means we have a highly responsive global supply chain that can supply high volume elite genetics with high health status.
Genus Opportunity
- Expand our genetic lead by driving genetic improvement faster than competitors
- Grow market share by (1) partnering with progressive customers who are winning production share, (2) increasing our wallet share with these customers, (3) winning new customers and (4) expanding into new markets
- Develop China into a ‘home market’ with a local supply chain and royalty focused sales team
- Launch our PRP once we have built the necessary regulatory portfolio
- Explore technology-led solutions to other diseases and challenges facing pork producers
BEEF
Production
Beef production is less homogeneous than dairy systems and utilises many breeds. The supply chain is also less vertically integrated than either dairy or pork. Use of advanced genetics and artificial insemination in the beef industry is lower because producers are in aggregate less consolidated and technified than dairy.
Beef production is mainly from pure-bred beef animals, although an increasing portion is coming from beef-on-dairy usage.
Genus Opportunity
- Drive genetic improvement faster than competitors
- Drive increased adoption of sexed, beef-on-dairy and Y-skew by dairy farmers by demonstrating the superiority of our proprietary beef genetics across the value chain, through trials and partnerships
- Develop more ‘pull-through’ partnerships with downstream partners in the value chain
DAIRY
PRODUCTION
Dairy farmers typically use artificial insemination to create pregnancies in their female cows. Cows produce milk for about 10 months after giving birth. This milk is typically marketed to a third-party processor, who collects, processes, stores and sells the milk or milk products (such as cheese and butter) to subsequent parts of the value chain.
Farmers either retain the female calves from dairy cows, to grow or maintain their dairy herd, or sell them to the beef industry alongside the male calves.
Over the last decade, progressive dairy farmers have increasingly utilised sexed semen to actively manage the sex of their dairy cow offspring. They inseminate their high-performing cows with X-skew sexed semen, which has a significantly greater proportion of sperm carrying a female chromosome, to increase the probability that the resultant offspring are females. These female calves are likely to be high performing and the farmers retain them for their dairy herd.
Lower-performing cows, whose offspring are less desirable for the dairy herd, are instead inseminated with conventional semen or, increasingly, with beef-on-dairy semen. Beef-on-dairy semen contains genetics with traits optimised for the beef industry, such as growth rate, feed efficiency and carcass value. These calves are therefore more valuable when sold to the beef industry, which creates more economic value for the dairy farmer. A nascent but exciting new market is sexed beef-on-dairy genetics. Here, Y-skew genetics are attractive to the beef industry because males tend to grow faster and produce heavier carcasses.
GENUS OPPORTUNITY
- Drive genetic improvement faster than competitors
- Execute actions identified under our Value Acceleration Programme (see page 19) to structurally improve margins, ROIC and cash generation
- Drive increased adoption of sexed, beef-on-dairy and Y-skew by dairy farmers
- Grow the market share of our IntelliGen third-party sexing solutions
Position
Genus is a leading player in global porcine and bovine genetics markets, serving many of the Top 100 pig producers and dairies globally. Investment in our proprietary genetic programmes has delivered world-leading products in all our species, validated by indices and on-farm trials. Genus is also recognised as a global leader in genomic, gene editing and sexing technologies.
